If only running a construction company were as easy as just getting the job done. But unfortunately along with it comes the responsibility, or headache, of the financial aspects of the business as well. Here are 6 financial challenges that construction companies, contractors and subcontractors typically face.
- Access to lines of credit – For many years banks have been hesitant to lend to construction companies especially on paid when paid contracts and progress billing.
- Inability to be flexible – Mainly due to cash flow, scheduling and staffing constraints, many in the construction industry find it hard to be flexible in regards to the job once it has started.
- Managing cash flow – It can be very hard for construction companies, contractors and subcontractors to manage their cash flow when many clients can take 30, 60 or 90+ days to pay and you have expenses such as materials and payroll to pay in advance.
- Unmanaged growth – It can sometimes be challenging to manage the growth of your business when winning one large job can be a game changer for your business.
- Credit Score – Just like your personal credit score your business credit score is an important consideration. You need to make sure you are paying your bills on time so that you have a preferable score as it can impact your ability to borrow money for things such as new equipment. Additionally, it can impact potential business relationships. You may find that certain suppliers and subcontractors won’t take the risk of working with someone with a poor credit score since it is an indication of your ability to pay.
- Credit History – If you are a new business it takes time to build a solid credit history.
Partnering with a factoring company can help alleviate many common financial challenges that construction companies, contractors and subcontractors face. For example, a factoring company can get you immediate access to working capital that can help you manage your cash flow, allow you to be more flexible, manage your businesses growth and pay your bills. The factoring company will do all this and not look at your credit history when evaluating your application; instead they look at the creditworthiness of your customers. Factoring companies who specialize in the construction industry will also lend on paid when paid contracts and progress billing unlike many traditional lending sources.